If you work for one of the TV networks (or even the cable guys), you are about to have a really unenjoyable two months coming up. We are entering into the upfront ad sales season for TV and for the first time, internet advertising and, increasingly, IPTV are making things uncomfortable for the networks. Advertisers have much greater choice now and are moving increasingly large sums of money over. While the spending on traditional TV ads still dwarfs other media, it will feel the pain first in ad rates and later in total demand.
In a recent NYT article, MSN has announced a broad array of original content created just for the web. This stuff is the real deal. I has known actors, custom formats (shorter duration) to fit the web and real producers behind them. Steven Colbert’s recent roasting of President Bush was downloaded over 500,000 in 2 days before being taken down. Hollywood is going internet and the networks are stuck between a rock and a hard place. On one hand, they shun the internet with their own content and let MSN and other players siphon off ad dollars and market share or they can contribute their content and hope they can figure out a business model that works. In the latter case, they are accelerating the adoption of IPTV.
Meanwhile, there is a dramatic difference in ad rates between online and offline. This differential will close over time, but in the interim, it means replacing very attractive ad $’s with greatly reduced inventory as they move onto the web. Furthermore, their pricing power offline is going down the tubes as more and more alternative distribution alternatives pop up and Tivo obliterates their expected viewer behaviours. Jupiter Research estimates that DVR’s could cost the Networks $8B of the $74B ad market due to skipped commercials.
The networks are going to have to fight to stay ahead of the curve on this and most believe they won’t get out of their own way. They should be aggressively trying new formats and content (like MSN and others) rather than trying to milk their cash cows. This also includes embracing new advertising channels as well including interactive, RSS and other approaches. I predict that IPTV is going to explode onto the web in the next 2-3 years. This will create opportunity everywhere:
1) infrastructure will be strained…rebirth of the telco equipment world
2) distribution alternatives ranging from Youtube to Akimbo to CinemaNow
3) advertising infrastructure, services and models to meet the new formats and channels.
Exciting times unless you run ad sales for the Networks…